November 8, 2013 Submitted Electronically Via Federal Rulemaking Portal: www.regulations.gov CC:PA:LPD:PR (REG-136630-12) Room 5205 Internal Revenue Service P.O. Box 7604 Ben Franklin Station Washington, DC 20044 RE: Notice of Proposed Rulemaking and Notice of Public Hearing on Information Reporting of Minimum Essential Coverage To Whom It May Concern: The U.S. Chamber of Commerce (the Chamber ) submits these comments in response to the Notice of Proposed Rulemaking which requests comments on Information Reporting by Minimum Essential Coverage ( NPRM ), as published in the Federal Register on September 9, 2013. 1 The NPRM contains proposed regulations providing guidance to employers that are subject to the information reporting requirements under section 6055 of the Internal Revenue Cost (Code), as enacted by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as PPACA ). 2 This NPRM was published by the Department of the Treasury ( Treasury ) and the Internal Revenue Service ( IRS ). The Chamber is the world s largest business federation, representing the interests of more than three million businesses and organizations of every size, sector and region, with substantial membership in all 50 states. More than 96 percent of the Chamber s members are small businesses with 100 or fewer employees, 70 percent of which have 10 or fewer employees. Yet, virtually all of the nation s largest companies are also active members. Therefore, we are particularly cognizant of the problems of smaller businesses, as well as issues facing the business community at large. Besides representing a cross-section of the American business community in terms of number of employees, the Chamber represents a wide management spectrum by type of business and location. Each major classification of American business manufacturing, retailing, services, construction, wholesaling, and finance is represented. These comments have been developed with the input of member companies with an interest in improving the health care system. 1 Notice of Proposed Rulemaking, 78 Fed. Reg. 54,986-54,996. (September 9, 2013) (to be codified at 26 C.F.R. pts. 1 and 301) [hereinafter referred to as the NPRM ] http://www.gpo.gov/fdsys/pkg/fr-2013-09-09/pdf/2013-21783.pdf 2 The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, amended by Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152 (2010). 1
OVERVIEW First and foremost, the Chamber appreciates the decision formally announced in Notice 2013-45 to provide transitional relief for 2014 from the information reporting requirements applicable to insurers, self-insuring employers, and certain other providers of minimum essential coverage under section 6055 of the Internal Revenue Code. We remain committed to working with the Treasury and the IRS to ameliorate to the greatest extent possible the administrative burden that this reporting requirement will impose on business. While we commend the Treasury and IRS for exploring a variety of potential simplified reporting methods, we find many sections of the NPRM extremely confusing and exceedingly complicated. We urge the Treasury and IRS to consider the following general concerns and provide flexibility to employers. If the Treasury and IRS chose to impose additional costly and burdensome reporting requirements, we have several specific concerns with the NPRM. GENERAL CONCERNS We continue to urge the Treasury and the IRS to simplify the burdensome requirements in several critical ways. First, employers must be permitted to satisfy their reporting requirements under section 6055 by certifying that they self-insure and offer minimum essential coverage to all full-time employees. Second, employers that self-insure and certify that they offer minimum essential coverage to all their full-time employees should not be required to file a duplicative report to meet the requirements of section 6056. Third, we urge the Treasury and the IRS to remain mindful that the purpose of collecting the information is to determine to whom an employer mandate penalty should be assessed, to whom an individual mandate penalty should be assessed and to whom a premium tax credit should be allocated. Only the information that is critical to make these determinations should be collected and reporting must be in permitted the least burdensome and simplest manner possible to ensure that administrative costs do not further exacerbate the cost of offering coverage. SIMPLIFY REPORTING REQUIREMENTS We continue to urge the Treasury and IRS to allow employers that offer minimum essential coverage to all full-time employees to simply certify that this coverage is offered. It is improper that the burden be placed on self-insured employers who offer coverage to affirmatively document that they are doing the right thing when, instead, it would be more cost effective and appropriate to require those who do not offer all full-time employees minimum essential coverage to report the necessary information. Specifically, additional guidance is necessary to: clarify which plans and accounts must be included in the reporting materials; more clearly define who is an employee; allow a safe harbors for employers to forgo the need to identify a covered employee as full-time or part-time; permit an entire company to consolidate a report and not individually report for each subsidiary with a different tax identification number, and; eliminate unnecessary data elements such as a justification for not offering coverage. PROVIDE FLEXIBILITY In promulgating regulations to implement the reporting requirements, the Treasury and IRS must 2
incorporate as much flexibility as possible and consider options to reduce duplication and administrative burdens. While reporting may be necessary to determine which employers must be penalized for failing to offer affordable coverage that meets the minimum essential value standard, we encourage the Treasury and IRS to remain focused on the reason the information is needed. With section 6056, the information is necessary to determine the penalty for an employer who is either not offering coverage or may have employees whom obtain tax credits to purchase coverage in the exchange. Therefore, we urge you to focus on what is necessary to determine the penalties. SPECIFIC CONCERNS REPORTING SOCIAL SECURITY NUMBERS IS PROBLEMATIC Employers do not generally collect or have access to the social security numbers of their employees dependents and spouses. While employers may have the social security number for their employees, it will be exceedingly difficult for employers to report the social security numbers for all individuals to whom coverage is offered or provided. Instead, we recommend that the Treasury, IRS and Social Security Administration use the data provided to them by employers to determine the social security numbers of covered dependents and spouses. Employers should be permitted to provide only the social security number of the employee subscriber and not the social security number of every relevant family member. With this information, Treasury and the IRS would be able to identify and determine the proper social security numbers of covered dependents listed based on income tax returns and, alternatively with the assistance of the Social Security Administration based on other the information provided by employers such as the name and date of birth of the covered family members. ELECTRONIC DELIVERY We appreciate the recognition by the Treasury and the IRS that electronic methods are a simpler and more efficient method to supplying employees with required information. While we understand the importance of consent, given the frequency with which electronic delivery is used to provide employees compensation, tax and benefit information, we request more flexibility. If an employee has consented on the record to receive other employment related tax or benefit information via electronic delivery, an employer should be permitted to rely on that consent and provide the 6056 statement to that employee via electronic delivery. Employers should be permitted to provide employees information on their W-2 statement that coverage was offered to the employee (same as with 6055), in addition to a generic electronic communication that these data elements were provided to the IRS. Employers should be permitted to report in this manner rather be required to provide individualized statements. TRACKING INFORMATION BY MONTH IS IMPRACTICAL The NPRM indicates that coverage and the number of employees must be reported for each calendar month. While it is understandable that monthly accounting would facilitate the process for the IRS and Treasury as it monitors employers compliance with the monthly requirement to provide affordable minimum value coverage, it is not feasible for many employers. For most employers health coverage and enrollment in coverage is typically tracked by the start date and 3
the end date of coverage. Additionally for employers with a significantly fluctuating workforce, it will be very difficult to report the number of employees for each calendar month. Given the necessary development of an option for employers with variable hourly employees to assess fulltime employment status on a period other than monthly with a measurement and stability period, an alternative reporting method to similarly permit these employers with variable hourly employees to track the number of full-time employees is necessary. TIME TO COMPLY IS NECESSARY Although the transitional relief for 2014 from the information reporting requirements applicable to large applicable employers under 6056 is helpful, we remain concerned about that challenge facing employers to meet the reporting requirements for 2015. We urge the Treasury and IRS to issue the final rules and related forms before the end of 2013 if compliance is to be possible for 2015. When huge system changes are required, sufficient time to implement and test compliance is critical. Given the complexity involved in drafting the regulations alone, and considering the challenges in developing and operationalizing the systems to achieve compliance, we implore Treasury and the IRS to take a compliance assistance approach when enforcing the reporting requirements. REQUISITE ECONOMIC ANALYSIS The Treasury and the IRS have repeated the mistake made in previous PPACA rulemakings by failing to provide for public comment any assessment of the likely economic impact of the proposed rule. The statement that It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined by Executive Order 12866, as supplemented by Executive Order 13563, and that Therefore, a regulatory assessment is not required, is an incorrect interpretation of the relevant Executive Orders. Executive Orders 12866 and 13563 require agencies to conduct economic impact assessments of all proposed regulations and of various alternatives considered in addition to the approach chosen to be proposed. The Executive Orders make clear that the purpose of conducting economic impact assessments is to facilitate the choice of the regulatory alternative that will provide the best benefit versus cost value to society. Choosing an alternative that delivers the required benefit (in this case information that will facilitate employees compliance with applicable tax laws) at the least cost is essential to ensure efficient regulation that does not overburden employers and discourage job creation. The Treasury and IRS must demonstrate that this obligation has been fulfilled. Instead, it appears that the Treasury and the IRS completely misunderstand the purpose of the $100 million annual cost threshold that defines and economically significant regulation. That threshold merely defines the compliance cost that triggers the obligation to submit cost/benefit economic analysis to Office of Management and Budget ( OMB )/Office of Information and Regulatory Affairs ( OIRA ) for review. If an NPRM is not economically significant, the agency may chose not to submit the proposal for review, but that determination does not relieve the agency of its fundamental obligation to conduct such analysis as the basis for its choice of regulatory approach and to share its analysis with the public for comment. The Treasury and IRS s failure to include an economic impact analysis in the materials submitted for public comment in this instance is arbitrary, and it deprives the public of valuable information needed in 4
order to comment cogently on the proposal. Furthermore, it is not self-evident that the economic impact will be less than the $100 million economic significance threshold. The NPRM will impact insurers or plan administrators who provide individual coverage under the Exchanges and administrators of self-insured employer sponsored plans. These affected entities will be required to provide detailed information to each individual covered under their plans and copies to the IRS. This requirement will involve significant initial costs to design and implement new software and related information systems, and it will entail significant operational cost each subsequent year to comply with the information reporting requirements. At the very least, the Treasury and IRS should provide the public with credible estimates of the numbers of returns that will be required. This information should be included in a Paperwork Reduction Act paperwork burden estimate and also reproduced in the NPRM preamble. The NPRM refers to a Paperwork Reduction Act documents supposedly filed with the Office of Information and Regulatory Affairs at OMB, but the referenced information is not included in the NPRM. Further, the documents that the Treasury and IRS claim to have filed with OIRA are not apparently available through the OIRA website or in the docket for this NPRM. This failure of transparency should be corrected before this rulemaking proceeds and the public should be provided with an opportunity to comment on the potential economic impact of the rule based on such burden estimate data. CONCLUSION We urge the Treasury and IRS to continue to work carefully, pragmatically and cooperatively with the numerous stakeholders to minimize burdens placed on employers and to provide flexibility as employers work to comply with the law. We look forward to continuing to work together in the future. Sincerely, Randel K. Johnson Senior Vice President Labor, Immigration, & Employee Benefits U.S. Chamber of Commerce Katie Mahoney Executive Director Health Policy U.S. Chamber of Commerce 5